Based on your answers to earlier questions , indicate whether the following statements are true or false: a. In general, the price of a bond rises when the interest rate rises. b. In general, the price of a bond rises when a given sum of money is received sooner rather than later.

The Board of Governors of the Federal Reserve System has the authority to raise or lower short-term interest rates. Between 2005 and 2006, the Fed aggressively raised the federal funds rate from $2.5 percent in February 2005 to$5.25 percent in June 2006. Assuming that other interest rates also rose, what impact do you think this had on economic investment spending? Explain your response. What do you believe the Fed's goal was?

Determine how much each of the following bonds should be worth when the market interest rate for borrowing and lending is 5%. a. A bond that promises to pay $3,000 in a lump sum after one year. b. A bond that promises to pay$3,000 in a lump sum after two years. c. A bond that guarantees a payment of $1,000 per year for three years.

The Quando Company's board of directors in Singapore was presented with the following list of investment projects for implementation in 2010:

POOJECT	TOTAL COST SINGAPORE DOLLARS	ESTIMATED RATE OF RETURN
Factory in Kuala Lumpur	$17,356,400	13%
Factory in Bangkok	15,964,200	15
A new company aircraft	10,000,000	12
A factory outlet store	3,500,000	18
A new computer network	2,000,000	20
A cafeteria for workers	1,534,000	7

Draw total investment as a function of interest rate (interest rate on$Y$-axis). Singapore currently has an interest rate of 8%. What amount of investment would you suggest to Quando's board?

You and 99 other partners are given the opportunity to purchase a gas station. Each partner would contribute $10,000. The station's revenues have been consistent at$420,000 per year for several years and are expected to remain consistent in the future. The operating costs of the station (including maintenance and repair, depreciation, and salaries) have remained consistent at $ 360,000 per year. 5-year Treasury bills are currently yielding$7.5 percent interest. Would you participate in the transaction? Explain your response.

Decide whether you agree or disagree with the following statements and explain your reasoning: a. Savings and investment are interchangeable terms. b. When I purchase a share of Microsoft stock, I am investing; when I purchase a government bond, I am not. c. Higher interest rates encourage more investment because the returns on those investments are higher.

Your Uncle Joe recently died and left you $\$10,000$ payable when you turn 30. You are now 20 years old. At the moment, the annual rate of interest obtained by purchasing 10-year bonds is $6.5$ percent. Your brother is currently offering you $\$6,000$ in cash to sign over your inheritance. Should you go ahead with it? Explain your response.

According to the text, the majority of stock in the United States is held by households through institutions, and the percentage of institutional holding (as well as the percentage of insider holding) varies depending on the maturity of the company. Choose two publicly traded companies in your area, one of which is relatively new and the other is relatively mature. To find trading information, go to www.finance.yahoo.com and enter each company in the "GET QUOTES" dialogue box, then click on "Key Statistics." Examine each company's share statistics. Describe the difference between the percentages of shares held by institutions and insiders for the two companies.

Bailey, Kaylee, Haley, and Joyce are four sorority sisters who discovered an opportunity to buy an Internet café. To make the purchase, each of the women would have to put up $$ 80,000. The café's revenue is expected to remain stable at $225,000 per year for the foreseeable future. The costs of running the café (excluding the opportunity costs of the investment). $$

Create a graph of an investment demand curve and explain its slope.

Wanda approaches Celia, an analyst with a venture capital firm, about financing her new business venture, a company that will build electricity-generating windmills for residential use. What information should Celia have before deciding whether to fund Wanda's new business?

What will happen to the present value of money if the market interest rate falls in a year? What happens if market interest rates rise?

The Red Sox won the World Series on October 29, 2007. The stock market rose on the same day. The S&P 500 index (an index of the 500 largest corporations in the United States) closed at $1540.98$. Ten-year Treasury notes paid $4.38 \%$ on the government's 10-year obligations. The Fed was set to announce a quarter-point reduction in the fed funds rate to $4.75$ percent. Look up the S&P 500, the 10-year treasury interest rate, and the fed funds rate today. They can be found at http://money.cnn.com. Please explain what has happened to those three numbers since 2007.

How would your responses to the preceding question change if the annual payments were increased to $\$ 2,000,000$ per year for 15 years?